Periodic Interest Rate Calculator

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Personal Loan Affordability Calculator

Understanding how much personal loan you can afford is a crucial step before applying. This calculator helps you estimate your borrowing capacity based on your income, existing debts, and desired loan term. It considers key factors to give you a realistic idea of what you can comfortably manage.

How Personal Loan Affordability is Calculated

This calculator uses a common lending guideline to estimate your personal loan affordability. Lenders often look at your Debt-to-Income (DTI) ratio. A general rule of thumb is that your total monthly debt payments, including the potential new loan payment, should not exceed a certain percentage of your gross monthly income (often around 43% for many lenders, though this can vary).

The formula works by:

  1. Calculating your current DTI ratio based on your existing debts and income.
  2. Determining the maximum total monthly debt payment you can afford without exceeding the lender's DTI threshold.
  3. Subtracting your existing monthly debt payments from the maximum affordable payment to find the maximum monthly loan payment you can handle.
  4. Using a loan payment formula (based on the interest rate and loan term) to estimate the maximum loan principal you could borrow given that maximum monthly payment.

Key Factors to Consider:

  • Gross Monthly Income: This is your income before taxes and other deductions. Lenders use this as the basis for calculating your DTI.
  • Total Monthly Debt Payments: This includes minimum payments on credit cards, car loans, student loans, mortgages, and any other recurring debt obligations. It does NOT typically include utilities, rent, or living expenses.
  • Interest Rate: A higher interest rate means you'll pay more in interest over the life of the loan, reducing the principal amount you can borrow for a given monthly payment.
  • Loan Term: A longer loan term allows for lower monthly payments, but you'll pay more interest overall. A shorter term means higher monthly payments but less interest paid in total.

Disclaimer: This calculator provides an estimate only. Actual loan approval amounts depend on the lender's specific criteria, your credit score, credit history, and other factors. It is recommended to speak with a financial advisor or lender for personalized advice.

function calculateAffordability() { var monthlyIncome = parseFloat(document.getElementById("monthlyIncome").value); var existingDebts = parseFloat(document.getElementById("existingDebts").value); var interestRate = parseFloat(document.getElementById("interestRate").value); var loanTermMonths = parseFloat(document.getElementById("loanTermMonths").value); var resultDiv = document.getElementById("result"); resultDiv.innerHTML = "; // Clear previous results // Input validation if (isNaN(monthlyIncome) || monthlyIncome <= 0) { resultDiv.innerHTML = "Please enter a valid Gross Monthly Income."; return; } if (isNaN(existingDebts) || existingDebts < 0) { resultDiv.innerHTML = "Please enter a valid Total Monthly Debt Payments amount."; return; } if (isNaN(interestRate) || interestRate = 100) { resultDiv.innerHTML = "Please enter a valid Annual Interest Rate between 1% and 99%."; return; } if (isNaN(loanTermMonths) || loanTermMonths 600) { // Assuming max loan term of 50 years (600 months) resultDiv.innerHTML = "Please enter a valid Loan Term in months (e.g., 12 to 600)."; return; } // — Calculation Logic — // Assume a maximum DTI ratio (e.g., 43%) – this can be adjusted var maxDTI = 0.43; var maxTotalMonthlyPayment = monthlyIncome * maxDTI; var affordableMonthlyLoanPayment = maxTotalMonthlyPayment – existingDebts; if (affordableMonthlyLoanPayment 0) ? affordableMonthlyLoanPayment : 0; resultDiv.innerHTML = "

Your Estimated Loan Affordability

" + "Estimated Maximum Loan Principal: $" + maxLoanPrincipal.toFixed(2) + "" + "Maximum Affordable Monthly Loan Payment: $" + estimatedMonthlyPayment.toFixed(2) + "" + "(Based on a maximum DTI of " + (maxDTI * 100).toFixed(0) + "% and your inputs)" + "Current Debt-to-Income Ratio (approx.): " + currentDTI.toFixed(1) + "%"; }

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